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Free Trade on Trial: Healthcare Security in a Pandemic
Free trade provides the wealth and the tools to combat COVID-19 and other public health challenges
By Daniel Griswold
The novel coronavirus pandemic has prompted some skeptics of free trade to argue during this election cycle that we need to repatriate supply chains and make more pharmaceuticals and medical supplies at home. But curbing the freedom of Americans to buy and sell medical-related goods in global markets would only weaken our health security, not strengthen it.
Regrettably, the misdirection on trade and public health is bipartisan. President Trump’s chief trade negotiator, Robert Lighthizer, said this spring as the pandemic emerged, “Unfortunately . . . we are learning in this crisis that over-dependence on other countries as a source of cheap medical products and supplies has created a strategic vulnerability to our economy.” Meanwhile, the Democratic presidential nominee, Joe Biden, has vowed to boost domestic production of medical supplies and personal protective equipment (PPE) “so we will never again be at the mercy of China and other foreign countries in order to protect our own people.”
Their shared goal of reducing trade in medical supplies by forcing more of them to be made domestically rests on a false assumption: that sourcing a significant share of those supplies from abroad somehow undermines our ability to secure what is necessary during public health emergencies. In fact, trade and an open US economy enhance our health security by expanding and diversifying our range of suppliers in a time of need.
Americans are not overly dependent on foreign medical supplies and PPE by any reasonable measure. Yes, we import billions of dollars’ worth of medical supplies, drugs, and active pharmaceutical ingredients each year, but we also export a lot and produce even more domestically. An April study by the St. Louis Federal Reserve found that the United States produces 70 percent of the kinds of medical equipment demanded domestically to combat COVID-19. Such equipment includes sterile gloves, medical protective clothing, protective goggles, and masks, as well as devices used to treat infected patients, such as ventilators, oxygen masks, and breathing masks.
For the pharmaceutical products and medical supplies we do import, we are not overly dependent on China and, in fact, rely on a diverse range of suppliers—mostly in other friendly, developed nations. A June report from the US International Trade Commission (USITC) examined more than 200 types of imported COVID-19-related goods and found that China is not a dominant supplier for the large majority of categories. What COVID-19-related goods the United States does import come mostly from friendly nations such as Brazil, Canada, Japan, Mexico, and members of the European Union.
The United States can best meet its changing needs for medical supplies not by requiring that they all be made in America, but by working with other nations to keep trade in such goods as free from government controls as possible. In an analysis of the USITC report, Scott Lincicome of the Cato Institute concluded,
The ITC report thus reveals that, far from suffering some sort of major “dependence” crisis that demands an immediate, wide‐ranging overhaul of the U.S. manufacturing sector and U.S. trade and procurement policies, the United States generally imports essential medical goods from a diverse (and ever‐changing) group of foreign suppliers, and that—at most—there are only a handful of these products (from China or elsewhere) which are so dominated by a single country that they might require the federal government’s attention.
“Diverse” is a key concept for US health security. In a time of crisis, Americans are not best served by having all potential supply concentrated in the domestic market but by our ability to source from multiple and dependable suppliers, both domestic and foreign. Instead of waiting for domestic production to gear up, we can buy from foreign producers who have supplies ready to sell. We can also buy critical goods at more competitive global prices and stockpile them in advance for unforeseen emergencies.
Openness to global trade also strengthens the fight against COVID-19 and other public health threats by expanding the ability of America’s most competitive producers to sell medical-related goods in global markets. In 2019, US companies exported $50 billion in medical-related equipment and laboratory testing instruments and another $60 billion in pharmaceutical products.
Being able to sell to the 95 percent of the world’s population that lives outside the United States allows US drug and medical equipment producers to realize economies of scale, which in turn allows them to sell their products in the United States at lower prices. In addition, access to global markets allows these producers to generate not only more sales and employment but also cash flow needed to fund more ambitious research and development. In other words, with free trade everyone wins, particularly Americans. By contrast, closing our market to imports will provoke other nations to do the same, diminishing export opportunities for America’s most innovative industries and ultimately driving up prices for American consumers.
More broadly, free trade and globalization have generated additional wealth in our country that can be deployed to fund public health efforts and also provide economic relief to workers and small businesses that have been hurt by mandated shutdowns. Robust trade also means that laptop computers, smartphones, and other telecommunications products are even more affordable and widely available. This has allowed more Americans to work remotely, conduct online commerce, and engage with social media, mitigating the disruption of physical distancing.
Beyond trade, America’s battle against COVID-19 has been joined by hardworking immigrants, especially those working in the healthcare field. According to the Journal of the American Medical Association, 29 percent of the physicians in the United States are foreign born, as are 20 percent of pharmacists and 16 percent of nurses. US hospitals and other healthcare facilities that have been strained to the limit by the coronavirus would be even less able to care for affected patients without this crucial benefit of globalization.
Far from complicating the fight against COVID-19, free trade and globalization have aided our national effort to combat the pandemic. Trade with other nations has boosted our own productive capacity and innovation while making medical supplies more affordable and readily available than they would be in a closed market. Depriving Americans of the freedom to buy and sell medical-related goods in global markets would be not only economically foolish but bad for our public health and security.
This is the third in a series of four articles that will examine the most common arguments against free trade. The first piece in the series focuses on the impact of trade on labor markets. The second piece addresses the relationship between trade and national security.